Category: Securities

Stay of SEC climate disclosure rules lifted

As discussed in these PubCo posts from Monday, Saturday, Tuesday  and Thursday, on March 15, in a one-sentence order, the Fifth Circuit granted a motion by Liberty Energy Inc. and Nomad Proppant Services LLC for an administrative stay of the SEC final climate disclosure rules. That case was just one of nine challenging the SEC’s rules in six different circuits.  As previously reported, upon request of the SEC, on March 21, 2024, the Judicial Panel on Multidistrict Litigation issued a consolidation order in these cases, randomly selecting the Eighth Circuit as the court in which to consolidate these petitions. Bloomberg has reported that, of 17 appellate judges in the Eighth Circuit, only one was appointed by a Democrat. Not that the politics should matter, of course. 

Judicial Panel consolidates petitions challenging SEC climate disclosure rules

As discussed in these PubCo posts from Monday, Saturday and Tuesday, on March 15, in a one-sentence order, the Fifth Circuit granted a motion by Liberty Energy Inc. and Nomad Proppant Services LLC for an administrative stay of the SEC final climate disclosure rules. That case was just one of nine challenging the SEC’s rules in six different circuits, with seven petitioners contending that the SEC went too far and had no authority to issue the rules and two affirming the SEC’s authority and contending that, in rolling back the proposal, the SEC has “fallen short of its statutory mandate to protect investors.”

SEC charges Skechers with failure to disclose related-person transactions involving family members

Recently, the SEC announced settled charges against Skechers U.S.A., Inc., a public footwear company traded on the NYSE, for allegedly failing to disclose payments to executives’ immediate family members and loans to executives and directors that represented unreimbursed personal expenses in excess of the disclosure threshold. In the settlement, Skechers agreed to pay a $1.25 million civil penalty. According to an SEC Associate Director of Enforcement, “[d]isclosure of related person transactions provides important information for investors to evaluate the overall relationship between a company and its officers and directors….Today’s action is a reminder that companies should take appropriate measures to ensure proper disclosure of such transactions.” This case serves as a good reminder, especially during proxy season, about the need to disclose, under Reg S-K Item 404, related-person transactions that involve significant unreimbursed personal expenses or family members who may be performing work for the company. Companies may want to beef up their due diligence processes and disclosure controls around these types of transactions.

New Cooley Alert: “Comparing the SEC Climate Rules to California, EU and ISSB Disclosure Frameworks”

If you’ve been following the developments in climate disclosure regulation, you know that many U.S. companies may well be subject to disclosure regulations beyond those of the SEC; regulations adopted in the European Union, countries outside the EU and in some states, such as California, could be applicable. And some aspects of those regulations are more sweeping—or just different—than those recently adopted by the SEC. For example, the EU employs the concept of “double materiality,” meaning the impacts of companies’ “business on the environment and society irrespective of the positive or negative effect of such impacts on companies’ financials”; by contrast, the SEC looks at materiality from the perspective of the reasonable investor making investment or voting decisions. In light of these and other differences, companies may face challenges in attempting to implement all of the applicable rules.  This essential new Cooley Alert, Comparing the SEC Climate Rules to California, EU and ISSB Disclosure Frameworks, from our ESG group provides some welcome guidance in sorting through the requirements of the different frameworks. 

Where will the fate of the SEC’s final climate rules be determined?

As discussed in these PubCo posts from Monday and Saturday, on March 15, in a one-sentence order, the Fifth Circuit granted a motion by Liberty Energy Inc. and Nomad Proppant Services LLC for an administrative stay of the SEC final climate disclosure rules. That case was just one of nine filed (so far) challenging the SEC’s rules in six different circuits, with seven petitioners contending that the SEC went too far and had no authority to issue the rules and two affirming the SEC’s authority and contending that, in rolling back the proposal, the SEC has “fallen short of its statutory mandate to protect investors.” As previously noted, the longevity of the Fifth Circuit stay, as well as the ultimate outcome of litigation about the rules, could well be determined by another court that is designated by the Judicial Panel on Multidistrict Litigation to hear the multiple pending challenges to the rules on a consolidated basis.  How does that work?  This article in Bloomberg does some explaining. 

Final SEC climate disclosure rules [UPDATED]— Part III Financial Information

On March 6,  the SEC adopted final rules “to enhance and standardize climate-related disclosures by public companies and in public offerings.” Even though, in the final rules, the SEC scaled back significantly on the proposal—including putting the kibosh on the controversial mandate for Scope 3 GHG emissions reporting and requiring disclosure of Scope 1 and/or Scope 2 GHG emissions on a phased-in basis only by accelerated and large accelerated filers and only when those emissions are material—all kinds of litigation immediately ensued. In one of those cases, a petition for review of the final rule was filed on March 6 in the Fifth Circuit by Liberty Energy Inc. and Nomad Proppant Services LLC, followed on March 8 by a motion asking the Court to issue an administrative stay and a stay pending review of the rule. As discussed in this PubCo post, on March 15, in a one-sentence order, the Fifth Circuit granted Petitioners’ motion for an administrative stay. How long this pause will continue is anyone’s guess; its longevity may well be determined by another court designated by the Judicial Panel on Multidistrict Litigation to hear the multiple pending challenges to the rules, to which SEC alludes in its response. But, given that the stay is temporary, below is Part III of a revision and update of my earlier post on the climate disclosure rules. Part III addresses “Financial Statement Effects.”

Fifth Circuit grants motion for administrative stay of SEC final climate disclosure rules

Is it pencils down already? As has previously been reported, a number of groups have filed petitions in different circuits requesting review of the SEC’s final climate disclosure rules. On March 6, the date of adoption of the final rules, one group, Liberty Energy Inc. and Nomad Proppant Services LLC, petitioned the Fifth Circuit for review of the final rule.  On March 8, Petitioners filed a motion asking the Court to issue an administrative stay and a stay pending review of the rule. Yesterday, in a one-sentence order, the Court granted Petitioners’ motion for an administrative stay.

Final SEC climate disclosure rules [UPDATED]—Part II GHG emissions and attestation

Last week the SEC adopted final rules “to enhance and standardize climate-related disclosures by public companies and in public offerings.” The disclosure, which will be included in registration statements and annual reports, will draw, in part, on disclosures provided for under the Task Force on Climate-Related Financial Disclosures and the Greenhouse Gas Protocol. Importantly, in response to public feedback, the SEC has jettisoned the mandate for Scope 3 GHG emissions reporting; the final rules require disclosure of Scope 1 and/or Scope 2 GHG emissions on a phased-in basis only by accelerated and large accelerated filers and only when those emissions are material.  Companies will also be allowed more time to file their emissions disclosures.  This post is Part II of a revision and update of my earlier post on the climate disclosure rules, which described the background of these rules, various changes from the proposal in the final rules that were identified in the adopting release, and the Commissioners’ statements at the open meeting at which the rules were adopted. Part I covered various aspects of the proposal other than the sections on GHG emissions disclosure and attestation and financial statement information.  This post addresses GHG emissions disclosure and attestation.  Financial statement information will hopefully be covered in separate subsequent post.

Final SEC climate disclosure rules [UPDATED Part I]

Last week, by a vote of three to two, the SEC adopted final rules “to enhance and standardize climate-related disclosures by public companies and in public offerings.” The disclosure, which will be included in registration statements and annual reports, will draw, in part, on disclosures provided for under the Task Force on Climate-Related Financial Disclosures and the Greenhouse Gas Protocol. The new rules will require public companies to disclose information about the material climate-related risks, companies’ governance, risk management and any material climate-related targets or goals, as well as disclosure of the financial statement effects, such as costs and losses, of severe weather events and other natural conditions. Importantly, as widely rumored, in response to public feedback, the SEC has jettisoned the mandate for Scope 3 GHG emissions reporting;  the final rules require disclosure of Scope 1 and/or Scope 2 GHG emissions on a phased-in basis only by accelerated and large accelerated filers when those emissions are material.  Companies will also be allowed more time to file their emissions disclosures.  The final rules provide for several phase-ins, as well as for some safe harbors. Although, in response to comments, the SEC made a serious effort to add materiality qualifiers—there are at least 1,003 references to “material” or “materiality,” but then, the release is 886 pages—and to eliminate many of the prescriptive granular requirements, don’t fear or celebrate (depending on your point of view) yet: there are still plenty of prescriptive granular requirements.  The SEC insists that, in adopting the rules, its intent was not to effect a specific climate result or to shift governance behaviors—the word “agnostic” appears at least five times in the adopting release.  Law 360 reports that three lawsuits have been filed against the rulemaking and at least two have been threatened—by the Chamber of Commerce and the Sierra Club.

New Cooley Alert: SEC Adopts Climate Reporting Requirements

As we reported yesterday in this PubCo post, the SEC has just adopted new rules on climate disclosure, issuing an 866-page adopting release.  The new rules will require public companies to disclose information about the material climate-related risks, companies’ governance, risk management and any material climate-related targets or goals, as well as disclosure of the financial statement effects, such as costs and losses, of severe weather events and other natural conditions. The new rules also eliminate the proposed mandate for Scope 3 GHG emissions reporting;  the final rules require disclosure of Scope 1 and/or Scope 2 GHG emissions on a phased-in basis only by accelerated and large accelerated filers when those emissions are material.